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Government Crack Down on Landlords Not Paying Enough Tax

Local buy-to-let landlords and property owners should take heed of the recent announcements from HMRC about unreported income generated from property.

HMRC believes that many taxpayers are not paying the amount of tax that they should be on rent monies paid to them by tenants at properties that are not their primary residence.  The government recently announced a campaign to seek out the offending taxpayers and impose penalties to recover unpaid taxes from up to six years ago.

HMRC have cross-referenced data from letting agencies with stamp duty records to compile a database that is split into two categories of property owner.  The first includes property owners that have informed HMRC that they own more than one property, but have not disclosed any income from it.  The second shows individuals with no tax record but an indication of property letting activity.

The government recently issued letters to over 500 property owners from this database, informing them of the ‘property campaign’ and encouraging them to volunteer information.  If a taxpayer had advised an agent to act on his or her behalf, a copy of the letter will have been sent to both the agent and the taxpayer.  The letters represent the earliest in a series of stages to be gradually rolled out.

Informing HMRC of extra income is a legal requirement.  The reporting requirement applies even if a loss has been made on the property, for example, where mortgage payments have exceeded the income earned.  Early disclosure is highly recommended, and may even encourage reduced penalties from HMRC.  The alternative is possible criminal prosecution.

This article has been provided by UK200Group.

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